After waking up on Thursday, we quickly glanced at the overnight market action in Asia and noticed that the Nikkei had tanked rather noticeably. Our first thought upon seeing this was “must be the yen” – and so it was:
June yen futures, daily – taking off again – click to enlarge.
Given the BoJ’s bizarre plan to push consumer price inflation to a 2% annualized rate within [enter movable goal post here] years, Mr. Kuroda cannot be overly happy about that. In fact, lately it seemingly doesn’t matter what he decides to do or not to do – the yen is going up anyway.
Last Thursday he reportedly “disappointed” markets by not expanding the BoJ’s madcap asset purchase program even further. We are not quite sure what people believe could possibly be achieved by making the parabola shown below even more parabolic.
Assets held by the BoJ – Mr. Kuroda’s “QQE” (“quantitative and qualitative easing”) was started in April of 2012. The program has certainly impoverished Japan’s citizens, who have seen their real incomes plummet. Lately it has however abjectly failed to achieve its stated goal, which is actually a blessing in disguise… – click to enlarge.
As far as the yen is concerned, we should point out that the trade-weighted real exchange rate of the yen at one point last year had declined to levels last seen in 1973. Combined with the recent strengthening of its technical condition, there is thus actually a good reason for the market to bid the yen up.
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